SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3446
(LOGO) NEW ENGLAND ELECTRIC SYSTEM
(Exact name of registrant as specified in charter)
MASSACHUSETTS 04-1663060
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
Registrant's telephone number, including area code
(508-389-2000)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Common Shares, par value $1 per share, authorized and
outstanding: 59,116,801 shares at September 30, 1999.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE> NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statements of Consolidated Income
Periods Ended September 30
(Unaudited)
<CAPTION>
Quarter Nine Months
------- -----------
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $662,211 $630,558 $1,915,000$1,822,129
-------- -------- --------------------
Operating expenses:
Fuel for generation 3,845 64,107 9,118 227,320
Purchased electric energy 255,458 155,878 737,003 400,946
Cost of sales AllEnergy 97,223 42,151 257,658 97,806
Other operation 117,809 131,873 354,470 379,286
Maintenance 20,823 11,927 61,469 88,949
Depreciation and amortization 51,780 52,475 172,748 164,333
Taxes, other than income taxes 26,370 36,591 80,357 113,948
Income taxes 29,327 43,292 78,417 102,981
-------- -------- --------------------
Total operating expenses 602,635 538,294 1,751,2401,575,569
-------- -------- --------------------
Operating income 59,576 92,264 163,760 246,560
Other income:
Allowance for equity funds used
during construction 452 114 1,586 114
Equity in income of generating companies 1,001 3,410 2,483 8,454
Other income (expense), net 7,141 5,034 13,905 5,026
-------- -------- --------------------
Operating and other income 68,170 100,822 181,734 260,154
-------- -------- --------------------
Interest:
Interest on long-term debt 17,184 22,218 51,829 71,681
Other interest 5,050 9,671 9,496 24,841
Allowance for borrowed funds used during
construction (299) (464) (945) (1,379)
-------- -------- --------------------
Total interest 21,935 31,425 60,380 95,143
-------- -------- --------------------
Income after interest 46,235 69,397 121,354 165,011
Preferred dividends and net gain/loss
on reacquisition of preferred stock
of subsidiaries 273 1,678 803 2,820
Minority interests 1,408 1,526 4,258 4,711
-------- -------- --------------------
Net income $ 44,554 $ 66,193 $ 116,293$ 157,480
======== ======== ====================
Average common shares - Basic 59,355,248 61,811,78359,355,248 63,279,656
Average common shares - Diluted 59,465,393 61,872,341 59,477,735 63,347,844
Per share data:
Net income - Basic $.75 $1.06 $1.96 $2.49
Net income - Diluted $.75 $1.07 $1.96 $2.49
Dividends declared $.59 $ .59 $1.77 $1.77
Statements of Consolidated Retained Earnings
(In Thousands)
Retained earnings at beginning of period $1,000,796 $ 970,833$ 998,912 $ 954,518
Net income 44,554 66,193 116,293 157,480
Dividends declared on common shares (34,861) (35,757) (104,716)(110,729)
---------- ---------- ---------- ----------
Retained earnings at end of period $1,010,489 $1,001,269 $1,010,489 $1,001,269
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statements of Consolidated Income
Twelve Months Ended September 30
(Unaudited)
<CAPTION>
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
Operating revenue $2,513,404 $2,480,343
---------- ----------
Operating expenses:
Fuel for generation 11,520 328,713
Purchased electric energy 969,404 522,649
Cost of sales AllEnergy 322,181 109,673
Other operation 488,661 530,807
Maintenance 81,560 128,788
Depreciation and amortization 215,077 212,661
Taxes, other than income taxes 101,172 147,577
Income taxes 97,790 152,123
---------- ----------
Total operating expenses 2,287,365 2,132,991
---------- ----------
Operating income 226,039 347,352
Other income:
Allowance for equity funds used during construction 2,105 112
Equity in income of generating companies 3,466 11,079
Other income (expense), net 5,617 (1,484)
---------- ----------
Operating and other income 237,227 357,059
---------- ----------
Interest:
Interest on long-term debt 69,953 98,630
Other interest 12,477 28,533
Allowance for borrowed funds used during construction (1,320) (1,879)
---------- ----------
Total interest 81,110 125,284
---------- ----------
Income after interest 156,117 231,775
Preferred dividends and net gain/loss on
reacquisiton of preferred stock of subsidiaries 1,437 9,640
Minority interests 5,825 6,415
---------- ----------
Net income $ 148,855 $ 215,720
========== ==========
Average common shares - Basic 59,423,881 63,641,444
Average common shares - Diluted 59,561,473 63,717,563
Per share data:
Net income - Basic $2.50 $3.39
Net income - Diluted $2.50 $3.39
Dividends declared $2.36 $2.36
Statements of Consolidated Retained Earnings
(In Thousands)
Retained earnings at beginning of period $1,001,269 $ 934,357
Net income 148,855 215,720
Dividends declared on common shares (139,635) (148,808)
---------- ----------
Retained earnings at end of period $1,010,489 $1,001,269
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE> NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $4,234,738 $4,130,102
Less accumulated provisions for depreciation and amortization 1,762,350 1,694,653
---------- ----------
2,472,388 2,435,449
Construction work in progress 41,796 52,977
---------- ----------
Net utility plant 2,514,184 2,488,426
---------- ----------
Investments:
Nuclear power companies, at equity 46,631 48,538
Other subsidiaries, at equity 2,361 2,374
Non-utility property and other investments 187,564 169,196
---------- ----------
Total investments 236,556 220,108
---------- ----------
Current assets:
Cash 200,989 187,673
Marketable securities - 57,915
Accounts receivable, less reserves of $21,035,000 and
$18,196,000 266,827 294,943
Unbilled revenues 85,309 87,467
Fuel, materials, and supplies, at average cost 38,795 38,339
Prepaid and other current assets 30,359 57,081
---------- ----------
Total current assets 622,279 723,418
---------- ----------
Regulatory assets 1,380,744 1,599,657
Goodwill, net of amortization 109,290 13,681
Deferred charges and other assets 36,940 25,245
---------- ----------
$4,899,993 $5,070,535
========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Issued - 64,969,652 shares $ 64,970 $ 64,970
Paid-in capital 736,716 736,744
Retained earnings 1,010,489 998,912
Treasury stock - 5,852,851 shares and 5,798,637 shares (240,516) (237,767)
Accumulated other comprehensive income, net 6,629 7,144
---------- ----------
Total common share equity 1,578,288 1,570,003
Minority interests in consolidated subsidiaries 39,294 38,742
Cumulative preferred stock of subsidiaries 19,480 19,480
Long-term debt 1,009,526 1,055,740
---------- ----------
Total capitalization 2,646,588 2,683,965
---------- ----------
Current liabilities:
Long-term debt due within one year 49,311 36,307
Short-term debt 38,500 -
Accounts payable 185,310 204,992
Accrued taxes 11,924 24,196
Accrued interest 13,347 16,680
Dividends payable 30,100 34,412
Other current liabilities 155,036 142,975
---------- ----------
Total current liabilities 483,528 459,562
---------- ----------
Deferred federal and state income taxes 449,690 472,140
Unamortized investment tax credits 55,536 65,292
Accrued Yankee nuclear plant costs 211,843 242,138
Purchased power obligations 740,046 832,668
Other reserves and deferred credits 312,762 314,770
---------- ----------
$4,899,993 $5,070,535
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended September 30
(Unaudited)
<CAPTION>
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $ 116,293 $ 157,480
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 177,218 167,363
Deferred income taxes and investment tax credits, net (20,882) (279,373)
Allowance for funds used during construction (2,531) (1,493)
Minority interests 4,258 4,711
Buyout of purchased power contracts - (333,520)
Decrease (increase) in accounts receivable, net
and unbilled revenues 38,992 (14,566)
Decrease (increase) in fuel, materials, and supplies 1,176 (22,887)
Decrease (increase) in prepaid and other current assets 26,955 18,691
Increase (decrease) in accounts payable (23,068) 52,907
Increase (decrease) in other current liabilities (11,663) 233,245
Other, net 864 (53,362)
--------- -----------
Net cash provided by (used in) operating activities $ 307,612$ (70,804)
--------- -----------
Investing Activities:
Proceeds from sale of generating assets $ - $ 1,728,588
Plant expenditures, excluding allowance for
funds used during construction (122,663) (133,557)
Proceeds from sale of New England Energy Incorporated
oil and gas properties - 50,000
Sale of available-for-sale securities, net 57,915 -
Other investing activities (119,172) (29,358)
--------- -----------
Net cash provided by (used in) investing activities $(183,920)$ 1,615,673
--------- -----------
Financing Activities:
Dividends paid to minority interests $ (3,913) $ (6,704)
Dividends paid on NEES common shares (108,821) (110,979)
Changes in short-term debt 38,500 (251,950)
Long-term debt - issues - 30,000
Long-term debt - retirements (33,411) (528,750)
Return of capital to minority interests and
related premium 18 (1,681)
Repurchase of common shares (2,749) (189,604)
Preferred stock - reacquisition - (5,153)
--------- -----------
Net cash provided by (used in) financing activities $(110,376)$(1,064,821)
--------- -----------
Net increase (decrease) in cash and cash equivalents $ 13,316 $ 480,048
Cash and cash equivalents at beginning of period 187,673 14,264
--------- -----------
Cash and cash equivalents at end of period $ 200,989 $ 494,312
========= ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Notes to Unaudited Financial Statements
Note A - Hazardous Waste
- ------------------------
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly known as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous
substances. A number of states, including Massachusetts, have
enacted similar laws.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. New England Electric System (NEES)
subsidiaries currently have in place an internal environmental
audit program and an external waste disposal vendor audit and
qualification program intended to enhance compliance with
existing federal, state, and local requirements regarding the
handling of potentially hazardous products and by-products.
NEES and/or its subsidiaries have been named as potentially
responsible parties (PRPs) by either the United States
Environmental Protection Agency or the Massachusetts Department
of Environmental Protection for a number of sites at which
hazardous waste is alleged to have been disposed. Private parties
have also contacted or initiated legal proceedings against NEES
and certain subsidiaries regarding hazardous waste cleanup. The
most prevalent types of hazardous waste sites with which NEES and
its subsidiaries have been associated are manufactured gas
locations. (Until the early 1970s, NEES was a combined electric
and gas holding company system.) NEES is aware of approximately
40 such manufactured gas locations, including some for which the
NEES companies have been identified by either federal or state
regulatory agencies as PRPs, mostly located in Massachusetts.
NEES has reported the existence of all manufactured gas locations
of which it is aware to state environmental regulatory agencies.
NEES is engaged in various phases of investigation and
remediation work at approximately 20 of the manufactured gas
locations. NEES and its subsidiaries are currently aware of other
possible hazardous waste sites, and may in the future become
<PAGE>
aware of additional sites, that they may be held responsible for
remediating.
In 1993, the Massachusetts Department of Public Utilities
approved a settlement agreement that provides for the rate
recovery of remediation costs of former manufactured gas sites
and certain other hazardous waste sites located in Massachusetts.
Under that agreement, qualified costs related to these sites are
paid out of a special fund established on Massachusetts Electric
Company's (Massachusetts Electric) books. Rate-recoverable
contributions of $3 million, adjusted since 1993 for inflation,
are added annually to the fund along with interest, lease
payments, and any recoveries from insurance carriers and other
third parties. At September 30, 1999, the fund had a balance of
$49 million.
NEES is one of several PRPs responsible for cleanup of the
Pine Street Canal Superfund site (Pine Street) in Burlington,
Vermont, where coal tar and other materials were deposited.
Between 1931 and 1951, NEES and its predecessor owned all of the
common stock of Green Mountain Power Corporation (GMP). Prior
to, during, and after that time, GMP manufactured gas at Pine
Street. In 1989, NEES paid the Environmental Protection Agency
(EPA) a portion of past response costs related to this site. In
1996, NEES signed a settlement agreement with GMP establishing
NEES' apportioned share for ongoing and future response costs.
On September 28, 1999, NEES signed a final consent decree with
the EPA and the State of Vermont establishing past and future
remediation costs. Under the consent decree, NEES is jointly and
severally liable with GMP and Vermont Gas Systems to perform the
work imposed under the consent decree, with GMP taking the lead
role. GMP has agreed to pre-fund a portion of its liabilities.
NEES recorded no additional reserves for Pine Street as a result
of the consent decree.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. There are also
significant uncertainties as to the portion, if any, of the
investigation and remediation costs of any particular hazardous
waste site that may ultimately be borne by NEES or its
subsidiaries. In certain cases, agreements have been entered
into with other parties which establish the liabilities for NEES
and its subsidiaries. If, however, the other parties to these
<PAGE>
agreements should seek protection under the bankruptcy laws,
liabilities for NEES and its subsidiaries could increase. The
NEES companies have recovered amounts from certain insurers, and,
where appropriate, intend to seek recovery from other insurers
and from other PRPs, but it is uncertain whether, and to what
extent, such efforts will be successful. At September 30, 1999,
NEES had total reserves for environmental response costs of $58
million, which includes reserves established in connection with
the Massachusetts Electric hazardous waste fund referred to
above. NEES believes that hazardous waste liabilities for all
sites of which it is aware, and which are not covered by a rate
agreement, are not material to its financial position.
Note B - Nuclear Units
- ----------------------
Nuclear Units Permanently Shut Down
Three regional nuclear generating companies in which New
England Power Company (NEP) has a minority interest own nuclear
generating units that have been permanently shut down. These
three units are as follows:
<TABLE>
<CAPTION>
Future
Estimated
NEP's Billings
Investment Date to NEP
Unit % $ (millions) Retired $ (millions)
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Yankee Atomic 30 4 Feb 1992 13
Connecticut Yankee 15 17 Dec 1996 67
Maine Yankee 20 15 Aug 1997 131
</TABLE>
<PAGE>
In the case of each of these units, NEP has recorded a
liability and an offsetting regulatory asset reflecting the
estimated future billings from the companies. In a 1993 decision,
the Federal Energy Regulatory Commission (FERC) allowed Yankee
Atomic to recover its undepreciated investment in the plant as
well as unfunded nuclear decommissioning costs and other costs.
Connecticut Yankee has filed a similar request with the FERC.
Several parties have intervened in opposition to the filing. In
August 1998, a FERC Administrative Law Judge (ALJ) issued an
initial decision which would allow for full recovery of
Connecticut Yankee's unrecovered investment, but precluded a
return on that investment. Connecticut Yankee, NEP, and other
parties have filed with the FERC exceptions to the ALJ's
decision. Should the FERC uphold the ALJ's initial decision in
its current form, NEP's share of the loss of the return component
would total approximately $12 million to $15 million before
taxes. Maine Yankee recovers its costs in accordance with
settlement agreements approved by the FERC in May 1999.
A Maine statute provides that if both Maine Yankee and its
decommissioning trust fund have insufficient assets to pay for
the plant decommissioning, the owners of Maine Yankee are jointly
and severally liable for the shortfall.
Under the provisions of industry restructuring settlement
agreements approved by state and federal regulators in 1998
(Settlement Agreements), NEP recovers all costs, including
shutdown costs, that the FERC allows these Yankee companies to
bill to NEP.
Operating Nuclear Units
NEP has minority interests in three other nuclear generating
units: Vermont Yankee, Millstone 3, and Seabrook 1.
Uncertainties regarding the future of nuclear generating
stations, particularly older units, such as Vermont Yankee, have
increased in recent years and could adversely affect their
service lives, availability, and costs. These uncertainties stem
from a combination of factors, including the acceleration of
competitive pressures in the power generation industry and
increased Nuclear Regulatory Commission (NRC) scrutiny. NEP
<PAGE>
performs periodic economic viability reviews of operating nuclear
units in which it holds ownership interests.
Vermont Yankee
NEP is engaged in efforts to divest its interests in the three
operating nuclear units mentioned above. In October 1999, the
Vermont Yankee Nuclear Power Corporation Board of Directors
announced its intention to sell the assets of Vermont Yankee to
AmerGen Energy Company (AmerGen), a joint venture by PECO Energy
and British Energy, for approximately $23.5 million. Under the
terms of the proposed agreement, Vermont Yankee will contribute
approximately $54 million toward the plant's decommissioning
trust fund and AmerGen will assume responsibility for the actual
cost of decommissioning the plant. The proposed agreement also
requires the existing power purchasers (including NEP) to
continue to purchase the output of the plant or to elect to buy
out of the power purchase obligation. The proposed sale, which
is subject to the execution of a definitive agreement, received
approval of the owners of Vermont Yankee in November 1999 and is
contingent upon regulatory approvals by the NRC, the Securities
and Exchange Commission, under the Public Utility Holding Company
Act of 1935, and the Vermont Public Service Board, among others.
NEP has a 20 percent ownership interest in Vermont Yankee and an
equity investment of approximately $10 million at September 30,
1999.
Millstone 3
In July 1998, Millstone 3, which is operated by a subsidiary
of Northeast Utilities (NU), returned to full operation after
being shut down since April 1996. In September 1999, NU agreed
to pay $10 million in fines and donations after its operating
subsidiary pleaded guilty to environmental violations and making
false statements to federal nuclear regulators, ending a criminal
investigation of the NU subsidiaries related, in part, to
Millstone 3.
<PAGE>
In August 1997, NEP sued NU in Massachusetts Superior Court
for damages resulting from the tortious conduct of NU that caused
the shutdown of Millstone 3. NEP's claim for damages included
the costs of replacement power during the outage, costs necessary
to return Millstone 3 to safe operation, and other additional
costs. Most of NEP's incremental replacement power costs have
been recovered from customers, either through fuel adjustment
clauses or through provisions in the Settlement Agreements.
In August 1997, NEP also sent a demand for arbitration to
Connecticut Light & Power Company and Western Massachusetts
Electric Company, both subsidiaries of NU (subsidiaries), seeking
damages resulting from their breach of obligations under an
agreement with NEP and others regarding the operation and
ownership of Millstone 3.
In November 1999, NEP, NU, and the subsidiaries executed an
agreement which settles the litigation and arbitration described
above. The settlement involves the payment of fixed and
contingent amounts to NEP, as well as an agreement by NU to
include NEP's Millstone 3 interest when NU sells its Millstone 3
interest at auction. Amounts received pursuant to the proposed
settlement will, after reimbursement of NEP's transaction costs
and net investment in Millstone 3, be credited to customers.
Note C - Town of Norwood Dispute
- --------------------------------
From 1983 until 1998, NEP was the wholesale power supplier for
the Town of Norwood, Massachusetts (Norwood). In April 1998,
Norwood began taking power from another supplier. Pursuant to
tariffs approved by the FERC in May 1998, NEP has been assessing
Norwood a contract termination charge (CTC). Through September
1999, the charges assessed Norwood amount to approximately $13
million, all of which remain unpaid. Norwood has appealed the
FERC's authorization of CTCs as well as the FERC's approval of
the Settlement Agreements and NEP's divestiture of its nonnuclear
generating assets to the First Circuit Court of Appeals (First
Circuit). NEP is pursuing a collection action in Massachusetts
Superior Court.
<PAGE>
Separately, Norwood filed suit in Federal District Court
(District Court) in April 1997 alleging that NEP's divestiture
violated the terms of the 1983 power contract. Norwood has
appealed to the First Circuit the District Court's dismissal of
Norwood's lawsuit.
Note D - Marketable Securities
- ------------------------------
At September 30, 1999, NEES had no marketable securities. For
the first nine months of 1999, the proceeds received from the
sale of securities previously held as available-for-sale totaled
approximately $147 million, which resulted in immaterial realized
gains and losses.
Note E - Average Common Shares
- ------------------------------
The following table summarizes the reconciling amounts between
basic and diluted earnings per share (EPS) computations.
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended Twelve Months Ended
- ------------------------------------------------------------------------------------------
Period Ended Sept. 30, 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income after interest
and minority
interest (000s) $44,827 $67,871 $117,096 $160,300 $150,292 $225,360
Less: preferred stock
dividends and net
gain/loss on
reacquisition of
preferred stock of
subsidiaries (000s) $ 273 $ 1,678 $ 803 $ 2,820 $ 1,437 $ 9,640
Income available to
common shareholders
(000s) $44,554 $66,193 $116,293 $157,480 $148,855 $215,720
Basic EPS $ .75 $ 1.06 $ 1.96 $ 2.49 $ 2.50 $ 3.39
Diluted EPS $ .75 $ 1.07 $ 1.96 $ 2.49 $ 2.50 $ 3.39
- -------------------------------------------------------------------------------------------
Average common
shares outstanding
for Basic EPS 59,355,248 61,811,783 59,355,248 63,279,656 59,423,88163,641,444
Effect of Dilutive
Securities
Average potential
common shares related
to share-based compen-
sation plans 110,145 60,558 122,487 68,188 137,592 76,119
- -------------------------------------------------------------------------------------------
Average common shares
outstanding for
Diluted EPS 59,465,393 61,872,341 59,477,735 63,347,844 59,561,47363,717,563
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Note F - Comprehensive Income
- -----------------------------
Comprehensive income for the periods below is equal to net
income plus "other comprehensive income," which, for NEES,
consists of the change in the unrealized holding gains on
available-for-sale securities during the period.
<TABLE>
<CAPTION> Periods Ended September 30,
-----------------------------------
Three Months Nine Months
------------ -----------
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Net income $44,554 $66,193 $116,293 $157,480
Other comprehensive income,
net of tax:
Unrealized gains/(losses), net
of tax expense of $(944), $(816),
$73, and $816, respectively (1,741) (1,506) 135 1,505
Less: Reclassification adjustments
for realized gains/(losses)
included in net income, net of
tax expense/(benefit) of $(77),
$66, $351, and $113, respectively (141) 121 649 208
------- ------- -------- --------
Total comprehensive income $42,954 $64,566 $115,779 $158,777
======= ======= ======== ========
</TABLE>
Note G - Segment Information
- ----------------------------
NEES has two reportable segments: (1) regulated electric
operations and (2) unregulated subsidiaries. The unregulated
subsidiaries are principally engaged in the marketing of energy
commodities and services and the construction and leasing of
telecommunications infrastructure. All of the other NEES
companies are part of the electric operations segment, including
the parent company and the administrative services subsidiary.
<PAGE>
<TABLE>
<CAPTION> 1999 1998
---- ----
(In millions) Electric Unregulated Total Electric Unregulated Total
-------- ----------- ----- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended September 30,
- ---------------------------
Revenues $553 $109 $662 $585 $45 $630
Net income (loss) $ 47 $ (3) $ 44 $ 70 $(4) $ 66
Nine Months Ended September 30,
- -------------------------------
Revenues $1,615 $300 $1,915 $1,719 $103 $1,822
Net income (loss) $ 121 $ (5) $ 116 $ 169 $(12) $ 157
September 30, 1999 December 31, 1998
------------------ -----------------
Electric Unregulated Total Electric Unregulated Total
-------- ----------- ----- -------- ----------- -----
Total assets $4,661 $239 $4,900 $4,948 $123 $5,071
</TABLE>
Note H - Derivative Instruments
- -------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities (FAS 133),
which establishes accounting and reporting standards for such
instruments. The effective date of FAS 133 is for fiscal years
beginning after June 15, 2000.
NEES, through its wholly owned subsidiary, AllEnergy Marketing
Company, L.L.C. (AllEnergy), uses derivative instruments to
manage exposure in fluctuations in commodity prices. At this
time, AllEnergy uses derivative instruments to manage risks
associated with natural gas, propane, gasoline, and oil prices.
As of September 30, 1999, all of AllEnergy's derivative
instruments qualified as hedges under Statement of Financial
<PAGE>
Accounting Standards No. 80, Accounting for Futures Contracts,
and are expected to qualify as hedges under FAS 133. As a
result, any gain or loss is deferred until recognized in the
income statement in the same period as the hedged item is
recognized in the income statement.
In addition, under the provisions of the Settlement
Agreements, NEES' distribution subsidiaries are required to offer
a default service option on a fully recoverable basis to those
customers who, for a variety of reasons, are not purchasing power
from a competitive supplier. The distribution subsidiaries are
required to procure this power supply through competitive
bidding. In March 1999, Massachusetts Electric entered into a
six month power supply contract with a third party to provide the
physical supply of this power at a variable market rate. This
contract was replaced with a similar contract upon its expiration
in September 1999. In May 1999, Massachusetts Electric entered
into an eight month financial contract with another third party
to convert this variable rate into a fixed rate for the majority,
if not for all, of the physical supply. This contract was
entered into to provide price protection for customers and is
therefore fully recoverable. Purchases under these contracts
related to default service and other services are expected to be
less than $7 million per month based on September 1999 service
requirements.
Note I
- ------
In the opinion of NEES, these financial statements reflect all
adjustments (which include normal recurring adjustments)
necessary for a fair statement of the results of its operations
for the periods presented and should be considered in conjunction
with the notes to the consolidated financial statements in NEES'
1998 Annual Report.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
- -----------------------------------------------------------------
This section contains management's assessment of New England
Electric System's (NEES) financial condition and the principal
factors having an impact on the results of operations. This
discussion should be read in conjunction with the consolidated
financial statements and footnotes and the 1998 Annual Report on
Form 10-K.
Merger Agreements
- -----------------
On December 11, 1998, NEES and The National Grid Group plc
(National Grid) agreed to a merger whereby National Grid would
acquire all of the outstanding shares of NEES for $53.75 per
share (subject to upward adjustment up to a maximum of $54.35 per
share depending on the date of closing). On February 1, 1999,
NEES agreed to acquire Eastern Utilities Associates (EUA) for
$31.00 per share subject to upward adjustment depending on the
date of closing. For a full discussion of NEES' merger
agreements with National Grid and EUA, see the Merger Agreements
sections of the NEES Form 10-K for 1998 and the NEES 1998 Annual
Report.
Update of Merger Agreements with National Grid and EUA
The NEES/National Grid merger has received approval or
clearance from shareholders of both National Grid and NEES, the
Federal Trade Commission (FTC), the Committee on Foreign
Investment in the United States, the Federal Energy Regulatory
Commission (FERC), the Vermont Public Service Board (VPSB), the
Connecticut Department of Public Utility Control (CDPUC), and the
New Hampshire Public Utilities Commission (NHPUC).
On November 3, 1999, the Office of the Consumer Advocate for
New Hampshire filed a motion seeking rehearing or reconsideration
of the merger approval by the NHPUC with respect to the treatment
of the acquisition premium and stranded costs. NEES and National
Grid have opposed the motion for rehearing.
<PAGE>
NEES and National Grid have also filed for merger approval
with the Securities and Exchange Commission (SEC), under the
Public Utility Holding Company Act of 1935 (1935 Act). In
connection with the SEC application, the Massachusetts Department
of Telecommunications and Energy (MDTE) and the Rhode Island
Public Utilities Commission (RIPUC) certified to the SEC that the
merger would not interfere with their authority or ability to
protect customers of NEES' distribution subsidiaries in
Massachusetts and Rhode Island, respectively.
In addition, NEES and National Grid have also filed for merger
approval with the Nuclear Regulatory Commission (NRC) to transfer
ownership licenses for its minority ownership interests in
regional nuclear plants. In July 1999, three subsidiaries of
Northeast Utilities (NU) filed a request for hearing with the NRC
with respect to financial qualifications and issues of foreign
ownership. In October 1999, the NRC issued an order granting the
request for hearing and directed NEES, National Grid, and the NU
subsidiaries to promptly determine whether the proceeding could
be settled without a hearing. In November 1999, NEES, National
Grid, and the NU subsidiaries executed an agreement with respect
to these issues. As part of this agreement, the NU subsidiaries
agreed to withdraw their intervention and request for hearing.
Assuming the NRC grants the motion to withdraw, NEES and National
Grid anticipate that the remaining required regulatory approvals
from the SEC, under the 1935 Act, and the NRC will be obtained in
a time frame that will allow the merger to be completed by early
2000.
The NEES acquisition of EUA has received approval or clearance
from EUA shareholders, the FTC, the CDPUC, and the FERC. NEES
and EUA have also made appropriate filings with the SEC, under
the 1935 Act, NRC, MDTE, VPSB, and the RIPUC. The acquisition of
EUA is expected to be completed by early 2000.
Industry Restructuring
- ----------------------
For a full discussion of industry restructuring activities,
NEES' divestiture of its nonnuclear generating business (the
divestiture), stranded cost recovery, accounting implications of
industry restructuring and divestiture, and the impact of
restructuring on the distribution business, see the "Industry
<PAGE>
Restructuring", "Accounting Implications", and "Impact of
Restructuring on Distribution Business" sections of the NEES Form
10-K for 1998 and the NEES 1998 Annual Report.
Year 2000 Readiness Disclosure
- ------------------------------
Over the course of this year, most companies have faced and
will continue to face a potentially serious information systems
(computer) problem because many software applications and
operational programs written in the past may not properly
recognize calendar dates associated with the year 2000 (Y2K).
This could cause computers to either shut down or lead to
incorrect calculations.
The NEES companies believe that their mission critical systems
used to deliver electricity are ready for date changes associated
with Y2K, in accordance with the criteria specified by the North
American Electric Reliability Council (NERC). Recognizing that
neither the NEES companies nor any other organization can make
guarantees about something as complex as Y2K, the NEES companies
have also developed and implemented the contingency plans
described below (including contingency plans in the event of
temporary disruptions of electric service) to address potential
problems caused by Y2K. In the event that a short-term
disruption in service occurs, NEES does not expect that such a
disruption would have a material impact on its financial position
or results of operation.
During 1996, the NEES companies began the process of
identifying the changes required to their computer software and
hardware to mitigate Y2K issues. The NEES companies established a
Y2K Project team to manage these issues, which consisted of as
many as 70 full-time equivalent staff at some points in time,
primarily external consultants being overseen by an internal Y2K
management team. To facilitate the Y2K Project, NEES entered
into contracts with Keane, Inc. and IBM to provide personnel
support to the Y2K Project. Through September 30, 1999, the NEES
companies have spent approximately $18 million with these
vendors, which is included in the cost figures disclosed below.
The Y2K Project team reports project progress to a Y2K Executive
Oversight Committee each month. The team also makes regular
reports to NEES' Board of Directors and its Audit Committee. The
<PAGE>
NEES companies separated their Y2K Project into four parts as
shown on the following page.
<TABLE>
<CAPTION>
Substantial Contingency Testing,
Completion Documentation,
of Critical and Clean
Category Specific Example Systems Management
- -------- ---------------- ----------- -------------------
<S> <C> <C> <C>
Mainframe/Midrange Accounting/Customer Completed Throughout 1999
systems service integrated
systems
Desktop systems Personal computers/ Completed Throughout 1999
Department software/
Networks
Operational/ Dispatching systems/ Completed Throughout 1999
Embedded Transmission and
systems Distribution systems/
Telephone systems
External issues Electronic Data Completed Throughout 1999
Interchange/Vendor
communications
</TABLE>
The NEES companies used a three-phase approach in coordinating
their Y2K Project for system-related issues: (I) Assessment and
Inventory, (II) Pilot Testing, and (III) Renovation, Conversion,
or Replacement of Application and Operating Software Packages and
Testing. Phase I, which was an initial assessment of all systems
and devices for potential Y2K defects, was completed in mid-1997.
These assessments included, but were not limited to, the review
of program code for mainframe and midrange systems, analysis of
personal computer hardware and network equipment for desktop
systems, reaching consensus with key "data exchange" partners
regarding the approach and execution of plans to address Y2K-
related issues, and coordination with other New England Power
Pool (NEPOOL) member utilities related to operational systems,
such as transmission systems. Phase II, which consisted of
renovation pilots for a cross-section of systems in order to
facilitate the establishment of templates for Phase III work, was
completed in late 1997. Phase III, which was completed on
<PAGE>
June 30, 1999, required the renovation, conversion, or
replacement of the remaining applications and operating software
packages.
Critical systems include major operational and informational
systems such as the NEES companies' financial-related and
customer information systems. These mission critical systems
were first addressed at an individual component level, and then,
upon satisfactory completion of that testing, reviewed at an
integrated level, during which the Y2K Project team tested for
Y2K problems which could be caused by various system interfaces.
Additionally, contingency plans have been implemented for mission
critical systems, as described below.
The overall Y2K Project was designed such that Y2K-related
work performed by external consultants was reviewed by NEES
employees, and vice-versa. The Y2K Project team management
continuously benchmarked its progress against the recommended
progress schedule documented by NERC, and has met all recommended
schedules, including the issuance of its Year 2000 Readiness
Letter to NERC on June 30, 1999.
The NEES companies also implemented a formalized communication
process with third parties to give and receive information
related to their progress in remediating their own Y2K issues,
and to communicate the NEES companies' progress in addressing the
Y2K issue. These third parties include major customers,
suppliers, and significant businesses with which the NEES
companies have data links (such as banks). The NEES companies
have identified standard offer (transition service) generation
service providers, telecommunications companies, and the
Independent System Operator-New England (ISO New England) as
critical to business operations. The NEES companies have been in
contact with all of these parties regarding the progress of their
Y2K remediation efforts, and will continue to monitor their
ongoing remediation efforts through continued communications.
The NEES companies cannot predict the outcome of other companies'
remediation efforts. Therefore, contingency plans have been
implemented, as described below.
The NEES companies believe total costs associated with making
the necessary modifications to all centralized and noncentralized
systems will be approximately $28 million, including the
<PAGE>
replacement of approximately one thousand desktop computers. In
addition, the NEES companies have spent $7 million (of which
approximately $6 million has been capitalized) related to the
replacement of the human resources and payroll system, in part
due to the Y2K issue. As of September 30, 1999, substantially all
Y2K-related costs have been incurred. The NEES companies
continually review their cost estimates based upon the overall
Y2K Project status, and update these estimates as warranted.
The NEES companies developed and implemented Y2K contingency
plans to allow for critical information and operating systems to
function from January 1, 2000, forward. These plans are intended
to address both internal risks as well as potential external
risks related to suppliers and customers. Part of the contingency
plan implementation for accounting and desktop systems will
include taking extensive data back-ups prior to year-end closing.
For operational systems, the NEES companies have in place an
overall disaster recovery program, which already includes
periodic disaster simulation training (for outages due to severe
weather, for instance). As part of the Y2K contingency plan
implementation, the NEES companies have reviewed their disaster
recovery plans and modified them for Y2K-specific issues, such as
a potential loss of telecommunication services. The NEES
companies conducted contingency plan drills on September 8, and
9, 1999.
Interregional and regional contingency plans have been
finalized for utility systems throughout the United States. At a
regional level, the NEES companies have participated and
cooperated with NEPOOL and ISO New England. Overall regional
activities, including those of NEPOOL and ISO New England, are
being coordinated by the Northeast Power Coordinating Council,
whose activities have been incorporated into the interregional
coordinating effort by NERC. Drills of these interregional and
regional contingency plans were also conducted on September 8,
and 9, 1999.
Earnings
- --------
Earnings for the third quarter and first nine months of 1999
were $.75 per share and $1.96 per share on 59.5 million average
diluted common shares, compared with $1.07 per share on 61.9
million average diluted common shares and $2.49 per share on 63.3
<PAGE>
million average diluted common shares for the third quarter and
first nine months of 1998.
The decrease in earnings for the third quarter of 1999
principally reflects the continuing impact of the divestiture,
partially offset by revenues from increased kilowatthour (kWh)
deliveries and lower non-generation-related property taxes and
operation and maintenance expenses.
Year-to-date earnings reflect the same factors affecting the
third quarter as well as significant revenue reductions due to
the impact of the restructuring of the utility business,
transaction and integration costs incurred in connection with
NEES' proposed merger with National Grid and acquisition of EUA,
partially offset by reduced losses from NEES' investments in
unregulated businesses.
Industry restructuring and the divestiture reduced third
quarter and year-to-date revenues and operating expenses by a net
of approximately $.75 per share and $1.55 per share,
respectively. This includes the partially offsetting effect of
$.09 per share for the year-to-date period related to the
elimination of certain liabilities under New England Power
Company's (NEP) open access transmission tariffs. In addition,
earnings for the third quarter and year-to-date period also
decreased due to transaction and integration costs (approximately
$.02 per share and $.11 per share, respectively). These
decreases for both periods are partially mitigated by the effect
of NEES' 1998 common share repurchase program and reduced
interest expense, as well as increased interest income on a year-
to-date basis due to the reinvestment of the proceeds from the
divestiture (collectively, approximately $.15 per share and $.55
per share, respectively).
As stated above, increased kWh deliveries and reduced non-
generation-related property taxes and operation and maintenance
expenses improved third quarter and year-to-date earnings.
Deliveries increased approximately 5.0 percent in the third
quarter and 4.5 percent on a year-to-date basis due primarily to
significantly warmer weather and the impact of a strong economy
(approximately $.08 per share and $.19 per share, respectively).
Non-generation-related property taxes and operation and
maintenance expenses decreased approximately $.20 per share and
$.30 per share for the third quarter and year-to-date period,
<PAGE>
respectively. The decrease in operation and maintenance expenses
is the result of reduced administrative costs due primarily to
workforce reductions and decreased Y2K-related costs, partially
offset by increased distribution maintenance costs related to
severe weather.
Unregulated businesses lost $.08 per share in the first nine
months of 1999 compared with $.20 per share for the same period
last year. In addition to other factors, the reduction in losses
is due to the growth of AllEnergy Marketing Company, L.L.C.
(AllEnergy).
Operating Revenue
- -----------------
Operating revenue increased $32 million and $93 million in the
third quarter and first nine months of 1999, respectively,
compared with the corresponding periods in 1998. The revenue
increase resulted from increases of approximately $64 million and
$197 million, respectively, from NEES' unregulated businesses,
principally due to acquisitions by AllEnergy, partially offset by
reduced revenue in NEES' core regulated business. The reduction
in core business revenue resulted from the continuing impacts of
industry restructuring, partially offset by the increase in kWh
deliveries and the elimination of certain liabilities related to
open access transmission tariffs discussed above.
Operating Expenses
- ------------------
Operating expenses for the third quarter and first nine months
of 1999 increased $64 million and $176 million, respectively,
compared with the corresponding periods in 1998, reflecting
increases of approximately $68 million and $196 million,
respectively, in NEES' unregulated businesses due primarily to
the increased cost of sales associated with AllEnergy's
acquisitions.
Fuel expense and purchased power costs on a combined basis
increased $39 million for the third quarter and $118 million on a
year-to-date basis. These increases reflect the cost of power
purchased to meet obligations to those customers who continue to
take transition power supply service from the NEES companies,
partially offset by the effects of the divestiture. In
<PAGE>
connection with the divestiture, the buyer of NEES' nonnuclear
generating business assumed NEP's purchased power contracts, with
the exception of NEP's fixed contributions toward the above
market portion of those contracts. Also partially offsetting
these increases for the year-to-date period are reduced costs of
$10 million in connection with the Maine Yankee and Connecticut
Yankee nuclear power plants which are shut down, as well as the
effect of a 1998 refueling outage at the Vermont Yankee nuclear
power plant.
The decrease in other operation and maintenance expenses on a
combined basis amounted to $5 million and $52 million for the
third quarter and first nine months of 1999, respectively. The
decrease is primarily due to reduced nonnuclear generation-
related costs of $5 million and $72 million, respectively,
resulting from the divestiture, reduced charge-offs related to
uncollectible accounts, and decreased administrative costs
resulting from workforce reductions and reduced Y2K-related
costs. These reductions are partially offset by increased
distribution maintenance costs as a result of severe weather in
the third quarter of 1999. Transmission wheeling expenses and
AllEnergy-related costs also increased in both the third quarter
and nine-month period, the latter of which is primarily due to
new business acquisitions. Finally, 1999 results also include
approximately $8 million of costs in connection with NEES'
proposed merger with National Grid and acquisition of EUA, as
well as increased costs of $4 million associated with the
partially owned Millstone 3 and Seabrook 1 nuclear generating
facilities which experienced refueling outages in the second
quarter of 1999.
Depreciation and amortization expenses decreased $1 million in
the third quarter but increased $8 million for the year-to-date
period. The third quarter decrease is due to the depreciation and
amortization of generation-related plant in 1998 being greater
than the recovery and amortization of generation-related stranded
costs in 1999. Partially offsetting the third quarter decrease
and contributing to the year-to-date increase is increased
depreciation of new plant expenditures and increased goodwill
amortization in connection with acquisitions by AllEnergy, as
well as the year-to-date impact of an $11 million annual increase
in depreciation rates in accordance with the provisions of the
Massachusetts industry restructuring settlement effective March
1998.
<PAGE>
The decrease in property and payroll taxes for the third
quarter and first nine months of 1999 reflects the divestiture
and the impact of one-time property tax adjustments paid in the
third quarter of 1998 to certain municipalities.
Interest Expense and Other Income
- ---------------------------------
The decrease in interest expense is principally due to reduced
long-term and short-term debt as a result of the divestiture.
The increase in other income for the third quarter and first
nine months of 1999 includes the gain from the sale of New
England Water Heater Company, Inc. In addition, on a year-to-
date basis, the increase also represents interest income
resulting from the reinvestment of the proceeds from the
divestiture and the impact of a premium on the reacquisition of
debt incurred by Massachusetts Electric Company in 1998,
partially offset by the discontinuance of equity earnings from
Narragansett Energy Resources Company as a result of its sale in
September 1998.
Liquidity and Capital Resources
- -------------------------------
Plant expenditures for the first nine months of 1999 totaled
$123 million. The funds necessary for utility plant expenditures
were primarily provided by internal funds.
<PAGE>
The financing activities of NEES subsidiaries for the first
nine months of 1999 are summarized as follows:
<TABLE>
<CAPTION>
Retirements
-----------
<S> <C>
(In Millions)
Long-term debt
- --------------
Massachusetts Electric $15
Narragansett Electric 8
Nantucket Electric 1
Hydro-Transmission Companies 9
---
$33
===
</TABLE>
In the first nine months of 1999, NEP increased its short-term
debt outstanding by $39 million.
In the event that NEES' proposed acquisition of EUA occurs
prior to the proposed NEES/National Grid merger, the funds
necessary for the acquisition would be provided by existing funds
and external borrowings.
At September 30, 1999, NEES and its consolidated subsidiaries
had lines of credit and standby bond purchase facilities with
banks totaling approximately $900 million. These lines and
facilities were used for liquidity support for $372 million of
NEP bonds in tax-exempt commercial paper mode and $39 million of
NEP short-term debt.
On July 1, 1999, AllEnergy acquired Texas-Ohio Gas, Inc.
(Texas-Ohio), an unregulated natural gas provider with operations
and customers in 12 states. With annual revenue of approximately
$60 million, Texas-Ohio delivers natural gas to approximately
3,000 commercial and industrial customers and maintains marketing
<PAGE>
relations with business and trade organizations across the
region.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Information concerning filings for approval of the proposed
mergers with The National Grid Group plc and Eastern Utilities
Associates, discussed in Part I of this report in Management's
Discussion and Analysis of Financial Condition and Results of
Operations, is incorporated herein by reference and made a part
hereof.
Information concerning an agreement to settle a lawsuit
brought by the Company's subsidiary, New England Power Company
(NEP) against Northeast Utilities on August 7, 1997 in
Massachusetts Superior Court, Worcester County concerning the
Millstone 3 nuclear unit and a demand for arbitration sent by NEP
to Connecticut Light & Power Company and Western Massachusetts
Electric Company concerning the Millstone 3 nuclear unit,
discussed in this report in Note B of Notes to Unaudited
Financial Statements, is incorporated herein and made a part
hereof.
Information concerning dismissal of a lawsuit brought against
the Company and NEP by the Town of Norwood, Massachusetts and
appeals of that lawsuit and related Federal Energy Regulatory
Commission orders, and NEP's collection action, discussed in this
report in Note C of Notes to Unaudited Financial Statements, is
incorporated herein and made a part hereof.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
The Company filed a report on Form 8-K dated July 1, 1999
containing Item 5.
The Company is filing Financial Data Schedules.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-Q for
the quarter ended September 30, 1999 to be signed on its behalf
by the undersigned thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/John G. Cochrane
John G. Cochrane,
Vice President and Treasurer
Authorized Officer, and
Chief Accounting Officer
Date: November 10, 1999
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent thereof assumes
or shall be held to any liability therefor.
Exhibit Index
-------------
Exhibit Description Page
- ------- ----------- ----
27 Financial Data Schedule Filed herewith
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED
STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW
ENGLAND ELECTRIC SYSTEM, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,514,184
<OTHER-PROPERTY-AND-INVEST> 236,556
<TOTAL-CURRENT-ASSETS> 622,279
<TOTAL-DEFERRED-CHARGES> 1,526,974 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,899,993
<COMMON> 64,970
<CAPITAL-SURPLUS-PAID-IN> 736,716
<RETAINED-EARNINGS> 1,010,489
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,578,288 <F3>
0
19,480 <F2>
<LONG-TERM-DEBT-NET> 1,009,526
<SHORT-TERM-NOTES> 38,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 49,311
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,204,888
<TOT-CAPITALIZATION-AND-LIAB> 4,899,993
<GROSS-OPERATING-REVENUE> 1,915,000
<INCOME-TAX-EXPENSE> 78,417
<OTHER-OPERATING-EXPENSES> 1,672,823
<TOTAL-OPERATING-EXPENSES> 1,751,240
<OPERATING-INCOME-LOSS> 163,760
<OTHER-INCOME-NET> 17,974
<INCOME-BEFORE-INTEREST-EXPEN> 181,734
<TOTAL-INTEREST-EXPENSE> 60,380
<NET-INCOME> 116,293
817 <F2>
<EARNINGS-AVAILABLE-FOR-COMM> 116,293
<COMMON-STOCK-DIVIDENDS> 104,716
<TOTAL-INTEREST-ON-BONDS> 51,829
<CASH-FLOW-OPERATIONS> 307,612
<EPS-BASIC> $1.96
<EPS-DILUTED> $1.96
<FN>
<F1> Total deferred charges includes other assets.
<F2> Preferred stock reflects preferred stock of subsidiaries. Preferred
stock dividends reflect preferred stock dividends of subsidiaries.
<F3> Total common stockholders equity includes treasury stock at cost and
unrealized gain on securities.
</FN>
